FX snapshot – US Dollar Index, EUR/USD, GBP/USD, NZD/USD

Dollar consolidation persists, bringing the potential for a deeper retracement within a dollar strength story.

New Zealand dollars in a pile
Source: Bloomberg

US dollar consolidation continues

The US Dollar Index continues to consolidate, with the price moving back to the Monday low of $99.03 overnight. This is a key level, as a close below $99.03 would complete a small double-top formation, pointing towards a deeper retracement to $98.34, which is Thursday’s main resistance level. However, while the price remains around $99.03, we seem primed for another break higher, given the clear uptrend in play.

A close above $99.59 would confirm the resumption of this trend and would likely spark another leg higher. Main support levels expected at $99.03, $98.61 and $98.34, whereas resistance would be expected at $99.59, $100.27 and $100.79.

EUR/USD gains overnight

EUR/USD saw yet another overnight gain, with the pair beginning to look like it is trading within a descending channel. As the pair now sells off once more it seems that this channel could hold. Ultimately, this channel looks like consolidation precluding another move lower, especially if the price remains below $1.079. Should it remain below $1.079, then another move lower back towards $1.0676 seems likely. Below that, the main long-term support levels to watch are $1.052 and $1.0462. However, with yesterday’s hammer candle, we could see some sort of retracement higher, thus a move back above $1.079, we could see a return to $1.0808 and $1.0833 resistance.

GBP/USD continues to rise

The bounce off our two-month trendline has gathered pace, with GBP/USD seeing another leg higher overnight. With MACD and stochastics both extended, momentum could bring a possible near term move lower.

However, until we see the price close below $1.5147, the uptrend seems likely to persist. A move back above $1.5187 would likely bring another strong move higher, where resistance levels at $1.5205 and $1.5219 are the closest levels. A close below $1.5092 would bring a more bearish outlook for a likely move back to $1.5207 and trendline support.

NZD/USD hits trendline resistance

NZD/USD has been respecting a number of trendlines originating from the 23 September low and today this price has begun selling off from it once more. With the clear downtrend in play over the last month, another move lower is possible. However, with a new high created overnight, any downside could be short term as a return to the top of this descending channel seems likely. Downside levels to watch are at $0.6498 and trendline support (currently $0.6506). Upside levels at $0.6589, $0.6619, $0.6644 and $0.6698.

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